Expanding Role of the CFO
Strategist, adviser, communicator, futurist: Retail chief financial officers have seen their role broaden so much in recent years that, in some cases, they have become virtual partners with the CEO. Once responsible primarily for financial stewardship, the CFO is embracing a growing number of additional roles encompassing strategic planning, technology and perhaps even a bit of crystal ball gazing. Some are even taking on COO functions.
One thing is certain: CFOs are not just number crunchers any more.
“The old chief financial officer was primarily the guy with the numbers,” said Al Ferrara, a partner and leader of the retail and consumer products practice of BDO, Melville, N.Y. “Today, CFOs are much more a part of senior management.”
Increasingly, CFOs are taking on two new additional roles: strategists and catalysts, according to Alison Paul, vice chairman and U.S. retail and distribution leader, Deloitte LLP.
“As strategists, they are shaping the overall direction of a retailer’s business, working directly with the CEO,” she explained. “They are vital in providing financial leadership and aligning business and finance strategy to grow the business. As catalysts, they are taking on an additional responsibility of instilling a financial approach and mind-set throughout the organization to help other parts of the business perform better.”
SHIFT: The shift has been driven by a number of factors, including the financial crisis, competition, globalization, technological innovation, sustainability awareness, growing regulations and compliance issues.
“The role [of CFOs] overall during and after the financial crisis has hit an inflection point,” explained Chris Donnelly, global managing director of Accenture Retail, Chicago. “It was such an extreme event that it forced them into the forefront. [CFOs] are taking on more responsibility beyond accounting and cash management functions. They are taking on more strategic discussions.”
But this evolution may have been even longer in the making, as the changes in retail over more than two decades has increased the need for creative thinking and someone dedicated to looking at a larger, more strategic picture.
“Now [the shopper] has so many options,” said Ellen Williams, senior client partner in Korn Ferry’s financial officer practice, Stamford, Connecticut. “Twenty-five years ago, department stores were king. Then came specialty stores, then e-commerce. Now, with omnichannel retailing, companies have to be very strategic.”
PARTNERS: The best CFOs now are partners with the CEO, sometimes literally the person charged with looking forward, and anticipating challenges and opportunities as the CEO and COO deal with daily operations. The result is that the CFO becomes something of a bench coach, a sounding board for the CEO.
“The CEO wants to push product,” explained Bob Comeau, a principal with Deloitte Consulting LLP, McLean, Virginia. “The CFO figures out how to do it. Today’s CFO has to look at a strategy and make it so it can be financed.”
But the CFO also should also have the freedom to challenge the CEO, to push back on ideas while allowing the CEO to talk through ideas, noted Les Berglass, chairman and CEO of executive search firm Berglass+Associates, New York City.
“The business has changed so much,” Berglass said. “Great CFOs used to be expected to know all the answers. Today’s great CFOs are the ones who know the right questions to ask.”
The growing scope of the job also means changing the skill set of the men and women who hold the post. Where once an accounting or finance degree was essential, it’s possible that a CFO won’t even be a CPA at all. Schooling still matters, but even more important is experience in multiple areas, or running a business or division, even if that’s in another company — or industry.
As the CFO role continues to evolve, it’s only natural that, for some, it is becoming a stepping stone to the number one position, either in house or at a different company.
According to executive search firm Crist|Kolder Associates’ “Volatility Report 2013,” report, CEO hires with CFO experience rose to 22% in 2013, up from 13% in 2012.